10/23/2009 @ 4:00PM

Google's Navigation Bombshell

Google
has a tendency to enter a market, undercut its competitors’ prices and put established players out of business. Navigation service providers are wondering if they’re next.

The companies, which provide voice-guided, real-time, turn-by-turn driving directions on people’s cellphones, have a hunch that
Google
is developing a mobile navigation application that it plans to give away for free.

Chatter about such a product first surfaced several years ago, when Google introduced a mobile version of its maps program. The proliferation of the search giant’s mobile operating system, Android, in recent months has given the rumors new fuel.

Google spokeswoman Carolyn Penner noted that consumers frequently ask the company to add navigation to Google Maps, but declined to comment on future products.

The company’s competitors are more vocal. “Google has clearly been investing in mapping,” says Steve Andler, vice president of marketing at the wireless navigation company Networks In Motion. Besides its popular Maps desktop program, Google offers a basic mapping service that works across all major mobile operating systems and a mobile mapping feature called Latitude that lets users share their locations with friends.

Some location-based service providers speculate that mobile navigation is the next logical step for Google. The market, though narrow, is lucrative. Users typically pay monthly subscription fees of $5 to $10, making it one of the most profitable types of mobile content.

Google, which generally gives its software away for free and recoups its investment through advertising, would likely sell ads within the navigation application rather than charge users, experts say. The ads could be particularly valuable because the program would know users’ precise locations and destinations, allowing advertisers to pinpoint specific kinds of consumers. Google recently started running sponsored link ads in
Apple’s
iPhone map application, which it helped build.

Another factor is the rise of Android, which makes distributing a Google navigation app easier than ever. Because navigation is such a popular–and profitable–mobile service, operators tend to offer their own navigation programs and steer consumers toward them. (Think
AT&T
Navigator,
Sprint
Navigation and
Verizon’s
VZ Navigator.) Android gives Google a way to bypass those barriers.

“Carriers totally control what’s on these devices,” says Andler. “But if Google controls the operating system, the carriers won’t be able to get rid of its services, including a navigation app.”

Close watchers of Google say there is evidence it is developing a navigation app. The company has been collecting mapping data for years via several methods, including high-resolution satellites and its own fleet of camera-equipped cars. In August, it rolled out an additional feature that sources traffic information directly from its users’ phones.

In early October, Google decided to use this data for its U.S. maps, ending a licensing agreement with map provider Tele Atlas. (Tele Atlas says it has a contract to work with Google on international maps through at least July 2013.)

The shift is telling because companies like Tele Atlas require partners (such as Google) to pay fees for each person who uses their data. Breaking ties with Tele Atlas is a sign that Google has both amassed a lot of mapping information on its own and plans to distribute it for free, observers say.

Would such a move shake up the market? Other location-based service providers say they won’t go free, even if Google does. “Measuring traffic requires sensors in the road, helicopters in the air and people processing data,” says Andler. “You could spend hundreds of millions, if not billions, of dollars collecting and processing map data.” Mary Beth Lowell, a spokeswoman for TeleNav, which provides mapping services to AT&T, Sprint Nextel and T-Mobile USA customers, agrees. “There’s a lot of content included in our applications that gets updated on an ongoing basis–and that costs money,” she says.

If they do end up pitted against Google, the companies are betting that consumers will opt for quality. “Millions of customers use our service because of its reliability, ease of use and additional features,” Lowell says. Andler contends the mobile market is different from the Internet, where “everything’s free and always in beta. People are willing to pay a premium to have something work all the time on their phones,” he says.

Of course, people said the same thing about mobile operating systems–before Google introduced Android.